Gandhar Oil Refinery Downgraded to Sell Amid Mixed Financial and Technical Signals

Quality Assessment: Operational Strengths Amid Long-Term Challenges

Gandhar Oil Refinery operates within the oil exploration and refinery sector, a capital-intensive industry often sensitive to commodity price fluctuations and global demand cycles. The company’s recent quarterly results for Q2 FY25-26 showed some operational strength, with net sales reaching a quarterly high of ₹1,059.91 crores and PBDIT at ₹65.84 crores, the highest recorded in recent periods. Additionally, the operating profit to interest ratio surged to 6.41 times, indicating robust coverage of interest expenses and a healthy operational buffer.

However, these positives are overshadowed by the company’s poor long-term growth trajectory. Over the past five years, net sales have declined at an annualised rate of -2.76%, while operating profit has contracted sharply by -21.51% annually. This sustained negative growth trend raises concerns about the company’s ability to expand or maintain profitability in a competitive environment. Furthermore, despite a low average debt-to-equity ratio of 0.10 times, signalling conservative leverage, the lack of growth momentum weighs heavily on the quality rating.

Valuation: Attractive Yet Reflective of Underperformance

From a valuation standpoint, Gandhar Oil Refinery presents an interesting case. The company’s return on capital employed (ROCE) stands at a reasonable 10.6%, and it trades at an enterprise value to capital employed ratio of 1.2, which is considered attractive relative to its peers. This discount in valuation partly reflects the market’s cautious stance given the company’s recent underperformance and uncertain growth outlook.

Despite this, the stock price has remained stagnant at ₹167.30, unchanged on the day of the rating change, and significantly below its 52-week high of ₹219.65. The stock’s 1-year return of -20.99% starkly contrasts with the broader market’s positive returns, with the BSE500 index generating 5.68% over the same period. This underperformance has likely contributed to the downgrade, as the market appears to price in the company’s challenges despite its valuation appeal.

Financial Trend: Mixed Signals with Recent Quarterly Strength

While the long-term financial trend remains negative, Gandhar Oil Refinery’s recent quarterly performance offers some respite. The company’s net sales and operating profit reached their highest quarterly levels in September 2025, suggesting a potential turnaround or at least a stabilisation in the near term. However, the annualised decline in profits of -11.6% over the past year tempers optimism.

Moreover, the company’s financial trend is not strong enough to offset the broader concerns about its growth prospects. The negative 5-year sales and operating profit growth rates highlight structural challenges, possibly linked to market competition, operational inefficiencies, or sectoral headwinds. Investors should weigh these factors carefully when considering the stock’s future trajectory.

Technical Analysis: Shift to Mildly Bearish Outlook

The downgrade to Sell was primarily driven by a deterioration in technical indicators. The technical grade shifted from sideways to mildly bearish, signalling a weakening momentum in the stock price. Key technical metrics reveal a complex picture:

• MACD: Weekly readings remain mildly bullish, but monthly signals are inconclusive, indicating short-term strength but longer-term uncertainty.


• RSI: Weekly RSI is bearish, suggesting downward pressure on price momentum in the near term, while monthly RSI shows no clear signal.


• Bollinger Bands: Weekly indicators are bullish, but monthly bands have turned mildly bearish, reflecting increased volatility and potential price weakness ahead.


• Moving Averages: Daily moving averages have turned mildly bearish, reinforcing the short-term negative trend.


• KST and Dow Theory: Weekly KST and Dow Theory indicators remain mildly bullish, but monthly signals are mixed, underscoring the uncertain medium-term outlook.


• On-Balance Volume (OBV): Both weekly and monthly OBV show no clear trend, indicating a lack of strong buying or selling pressure.

Overall, the technical picture suggests caution, with short-term bearishness outweighing intermittent bullish signals. This shift in technical momentum was a key factor in the downgrade decision.

Comparative Performance: Underperformance Against Benchmarks

Gandhar Oil Refinery’s stock returns have lagged significantly behind benchmark indices. Over the past week and month, the stock delivered returns of 12.81% and 33.09% respectively, outperforming the Sensex’s 0.88% and -0.32% returns in the same periods. However, this short-term outperformance is overshadowed by the stock’s 1-year return of -20.99%, which contrasts sharply with the Sensex’s 7.85% gain and the BSE500’s 5.68% rise.

This divergence highlights the stock’s volatility and inconsistent performance, factors that likely contributed to the cautious stance reflected in the downgrade. Longer-term returns over three, five, and ten years are not available, but the company’s historical underperformance relative to the market is evident.

Shareholding and Market Capitalisation

The company remains majority-owned by promoters, which can be a double-edged sword; while promoter control often ensures strategic continuity, it may also limit minority shareholder influence. Gandhar Oil Refinery’s market capitalisation grade is rated 3, reflecting a mid-tier market cap status within its sector. This positioning influences liquidity and investor interest, factors that can affect stock price movements and valuation multiples.

Conclusion: A Cautious Outlook Amid Mixed Signals

Gandhar Oil Refinery’s downgrade from Hold to Sell by MarketsMOJO is a reflection of its mixed fundamental and technical profile. While recent quarterly results show operational improvements and valuation metrics suggest some attractiveness, the company’s long-term negative growth trends, significant underperformance relative to market benchmarks, and a shift to a mildly bearish technical outlook weigh heavily on investor sentiment.

Investors should approach the stock with caution, considering the risks posed by its subdued growth prospects and technical weakness. The current Mojo Score of 48.0 and Sell grade underscore the need for careful analysis before committing capital, especially given the availability of potentially superior alternatives within the oil sector and broader market.

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